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Bill Holter 1-19-16 Someone is lying

“Someone is lying?” is a humorous title because in today’s world this could pertain to nearly anything. In this case I am speaking of the Dallas Fed and the banks they oversee. As you know, Zerohedge wrote last Friday of the Dallas Fed. They said the Fed had “issued guidance” to the banks they oversee to not report non performing energy loans and also to not push any of these entities into bankruptcy. Yesterday the Dallas Fed responded with denial in a tweet.

First, I am not a lawyer but ZH’s response sounds very much like a legal response and speaks to “discovery”. This in itself is quite interesting as it is about the closest thing to “audit the Fed” as we have gotten to this point. For the Dallas Fed to respond in a public tweet was in my opinion a VERY BAD idea. I say this for several reasons, first, we now know for a fact the Fed reads what ZH posts. Secondly and more importantly, since we now know this for fact …the Fed is now caught in a trap of their own making. Since they read ZH posts, how can they ignore these latest questions. LOGICAL questions I might add! And, if they do respond …there will surely be MORE QUESTIONS!

As for the title, someone IS lying and it does not take a rocket scientist to tell “who” it is. Either the Dallas Fed did not give their banks guidance to hide nonperforming loans or the banks decided to do this on their own. If the banks did this on their own, then they and their auditors cooked the books and will face consequences. How do we know this? Oil has gone from $110 to under $30 and while banks have been lending into the energy patch. It was recently estimated that around $250 billion in debt has been lent to companies who are now net cash flow negative and unprofitable with $30 oil, there WILL BE bankruptcies! There is just no way that loan loss reserves are not needed as we are looking at a huge “bubble” inflated and now bursting.

Going one step further, we will certainly see some lawsuits against banks for not adding to loss reserves and properly accounting for the debacle. Do you think in the court of law and during the true discovery process we won’t find out “why” these banks are hiding the truth? What then? If it turns out they ‘fess up and put the blame on orders from the Fed, what happens to Fed credibility? On the other hand, if the banks do burden the blame …between the very real loan losses and judgments against them …will they even continue to be solvent or even exist?

I don’t want to make this piece too long but the point “someone is lying” is a very important one. The Federal Reserve as I have recently written has lied themselves into a corner by citing BLS statistics as their reason for raising rates. In the real world there was ZERO reason to tighten and plenty of reasons to ease which is why we heard on Friday about “negative interest rates”. This is very similar to a young child who lied and must continue to lie to cover up past lies. The lies become so big, so prevalent and so illogical that the little kid becomes “frenzied” when even he knows he is caught. How long before the Fed becomes frenzied?